Previously, some investment rules were rigid and absolute, preventing trustees from making the same type of investment decisions that regular investors make every day. Some types of investments were flatly prohibited, while others were available only at personal risk to the trustee: if the investment was profitable, the trust received the profit, but if the investment was unprofitable, the trustee had to cover the loss from his or her own pocket.
The new law adds some flexibility and discretion for trustees to make reasonable investment decisions in light of the purposes of the trust and the varying situations of the beneficiaries, and includes factors that the trustee should consider when making investment decisions. The new law also allows the trustee to delegate investment decisions to skilled investment professionals. Finally, the law now requires that a trustee's decisions be evaluated based on the circumstances at the time an investment is made, and not based on hindsight.
If you are the trustee of a California trust, you should probably consult with your attorney to determine how this new law may affect you.